This is a follow-up on one of my favorite companies. By any measure I can come up with, the Aluminum Company of China Ltd. (ADS) (NYSE: ACH) -- sometimes referred to as Chalco -- is one of the best stock buying opportunities on planet earth, short of having insider information and not getting caught. The numbers are so good that it is driving me nuts trying to figure out how this or any company could be so under-valued. I already own it and advised my readers to jump in at $22 about two months ago (see Chasing value: Aluminum Corporation of China ADS). Those that did have seen over 50% growth in eight weeks. Not bad!
Well, I would like to buy more but there has not been much of a dip. When it went to $26 per share I thought I would buy more if it dipped to $24. You know the drill . . . it keeps staying just out of my reach because I want a deal, I want deep value. So yesterday it closed at $32.93 after reaching a high of just over $35 earlier in the month. So is now the right time?
I keep asking myself what is wrong with this picture? What is it that I do not see? If I buy more of this stock am I going to get broadsided by some accounting scandal? Have they been cooking the books? It is just not possible to be so cheap. When I was crowing about it before I thought it was a screaming steal at $22.98 and I was right. But looking at it today, it still seems like it is.
Furthermore, in looking at a recent S&P report, which gives it a rating of 3 stars which is "hold" and a 12 month price target of $35 (I love when price targets 12 months out have to be changed when the analysts are run over by the facts), there does not seem to be any hint of a problem. In particular I love the part where it states that Chalco is the ONLY Alumina producer in China! How will anyone else ever compete?
As China expands its airline industry and automotive industry, to name just two growing users of aluminum, I can't imagine that ACH does not have decades of growth in front of it. I was just discussing this with a friend of mine visiting from Hong Kong and she said, "Don't forget about aluminum windows." Perhaps it does not matter what price you buy it at if you are looking at investing for decades? Maybe it does not matter if you overpay by 25% given the long term prospects? I am sure many of you reading this, that have been following the stock, are thinking similar thoughts.
Perhaps a walk on the beach or counseling (or Chinese herbs) might help me from going bonkers . . . maybe I'm already there. In any event, if you do not at least have ACH on your watch list, you will be sorry!
Those of you who are new to Bloggingstocks.com can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.
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Reader Comments (Page 1 of 1)
6-03-2007 @ 7:09PM
Eamon said...
Chalco is NOT the only alumina manufacturer in China.
6-04-2007 @ 10:21AM
Sheldon L said...
Eamon,
Thank you for your comment. I was repeating what is stated on the AOL M&F profile.
The same is also stated on Yahoo Finance page:
Aluminum Corporation of China Limited (Chalco) has masterminded its way into mixing alumina and aluminum. Chalco is the only maker of alumina -- which is refined from bauxite and a key material in producing aluminum -- in China. The company produces over 7 million tons of alumina products (including alumina, alumina hydrate and alumina chemicals), which makes it the second-largest maker of alumina in the world. Chalco also produces a million tons of primary aluminum annually. Chinalco, a state-owned enterprise, owns more than 40% of the company.
They distinguish between "alumina bauxite" and aluminum...controling the raw material is the key.
6-04-2007 @ 1:10AM
Lisa said...
Chalco doesn't look like the stock for me, BUT I've learned that seldom to the right time and the right price come together. So--if either the right price comes around and I can find the cash somewhere OR the right time comes around (which means I have the cash as part of my scheduled buying plan), I buy. I may not make as much as if I had both time and price on my side, but I still do okay.